AustralianSuper, the country’s largest pension fund, is shifting money into equities on the expectation that artificial intelligence (AI) will fuel further gains in tech stocks. 

The A$335 billion (US$223 billion or RM1.06 trillion) fund has started the new financial year 5% to 6% overweight in stocks, chief investment officer Mark Delaney said in an interview. AustralianSuper has moved money from its fixed interest and cash portfolios to expand its global and domestic equities allocation to about 55% of its portfolio, a position it expects to maintain or “possibly” increase.

Delaney - like other large investors - has benefited from exposure to the “Magnificent Seven” mega caps. He likened the current tech boom to other periods of innovation such as the introduction of computing, the internet and mobile phones, that would run for five to 10 years in three phases. He also anticipates that the US Federal Reserve (Fed) will cut interest rates, giving stocks additional support. 

“The current environment whereby the economy holds up reasonably well and the Fed starts to ease will be one which provides favourable tailwinds for stocks,” he said.

While tech was a bright spot, other assets classes were a drag on the fund’s performance. Delaney said investments that had exposure to higher interest rates struggled, particularly real estate. 

AustralianSuper’s balanced option, where 90% of members have their retirement savings invested, returned 8.5% for the financial year. The high growth option delivered 10.2%. Rival Australian Retirement Trust, the nation’s second-largest fund with A$285 billion, returned 11.3% for its high growth option. The broader industry has returned 8.8% for the financial year, according to research house SuperRatings.   

Australia’s A$3.9 trillion is the fastest-growing retirement savings pool in the world, fuelled by compulsory contributions of workers’ salaries of 11.5%. With inflows of about A$2 billion each week, some of the largest funds, including AustralianSuper, have opened offices in London and New York as they seek better access to deals. 

Delaney said AustralianSuper’s London office was poised to hire four new portfolio managers, and would grow from the current staff of 140 to 200 in the next two years. Delaney said the US office was primarily to give better access to private equity deals, while private credit is also still an area of firm interest. 

“The returns are not as good as what they were 12 months ago, but they are still pretty attractive,” Delaney said of private credit. 

  - Bloomberg